SINGAPORE- Asian stock markets struggled to make headway on Thursday, after weak US consumer data stoked recession worries and nudged investors toward safe assets such as bonds, while Japan’s yen rose as markets doubted the Bank of Japan’s policy commitments.
MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.8 percent and benchmark 10-year US Treasury yields, which fall when prices rise, hit their lowest since September at 3.66 percent. US crude futures fell 1 percent.
Japan’s Nikkei also dropped 1 percent and the yen rose about 0.4 percent to 128.45 per dollar, unwinding moves that followed the Bank of Japan (BOJ) scotching speculation of a shift and leaving monetary policy settings unchanged a day earlier.
The BOJ has pursued ultra-easy policy settings for decades in an attempt to generate inflation and growth, but markets doubt it can keep that up, and traders have been selling Japanese government bonds and buying yen to bet on a shift.
The Nikkei dip and the bounce for the yen suggest such speculation is here to stay, at least for now.
“There’s an intense amount of speculation in the market that now that the January (BOJ) meeting has happened without any changes … that we’ll see something in March,” said Shafali Sachdev, head of FX, fixed income and commodities in Asia at BNP Paribas Wealth Management in Singapore.
April was another possibility, she added, since by then the BOJ would have a new governor. “My guess would be that more speculators would look to build positions going into these meetings.”
Ten-year Japanese government bonds, the focus of markets’ challenge to the BOJ because of the zero-yield target and 0.5 percentage point limit on its upward movement, yielded 0.415 percent.
Overnight, the S&P 500 lost 1.6 percent after data showed US manufacturing output had slumped last month and retail sales had fallen by the most in a year.
S&P 500 futures ESc1 dropped 0.2 percent in Asia and were close to breaking below the 50-day moving average.
“The decline in retail spending and industrial production adds to the theme of the economy slowing and heading into recession in 2023, and pushes back on the soft landing narrative dominating markets since January,” said National Australia Bank’s head of market economics, Tapas Strickland.
